As the Middle East and North Africa region continues to advance in its implementation of open banking, it is clear the benefits of increased competition, innovation, and financial inclusion are within reach for both consumers and financial institutions, writes ABDULLA ALMOAYED.

The Middle East and North Africa (Mena) region is now shifting gears and gaining momentum in its adoption of open banking, as it moves into the next phase of executing the frameworks and implementation plans, initially set out in previous years.

The region’s progressive leaders and forward-thinking regulators are at the forefront of driving this movement forward. They are true innovators: launching testing sandbox models, applying best practices and frameworks, and developing detailed implementation plans outlining each step of the process. As an example, there has been a significant increase in fintech regulatory sandboxes in the Mena region, with 11 in operation as of November 2022, compared to just four in 2019.

Furthermore, the region’s fintech scene has been growing at an unprecedented pace, with no sign of slowing down anytime soon. In 2022, the sector received its highest funding, surpassing other industries. This incredible growth is largely due to governments’ progressive agenda, which has been pushing for innovation and growth in the financial space. With so much momentum behind it, the future of fintech in the region is looking bright and full of promise.

Now, let’s take a closer look at how open banking has been evolving and advancing in different markets.

Building a strong financial infrastructure in the UAE

The Central Bank of UAE has recently unveiled an exciting new initiative to solidify the country’s position as the go-to destination for financial and digital payments in the region. The Financial Infrastructure Transformation programme has nine strategic initiatives to enhance competition and drive innovation in financial services. These include Open Finance, a national e-KYC system for all UAE-licensed financial institutions, and the establishment of an Innovation Hub. With these bold moves, the UAE is set to become a force to be reckoned with in the global fintech arena.

Furthermore, in line with the Central Bank’s ambitious vision, there is a growing interest among banks and fintechs in the concept of open finance. A prime example is the Dubai International Financial Center’s Open Finance Lab, an innovative programme launched in June 2022. This initiative is exploring and developing open finance solutions, with Tarabut Gateway as the preferred platform partner. With such ground-breaking initiatives, the UAE is quickly becoming a hub for cutting-edge fintech solutions  – set to revolutionise the financial landscape.

Open banking takes flight in KSA

The Central Bank of Saudi Arabia (SAMA) has been working tirelessly to make open banking a reality in the kingdom. While 2021 was focused on designing and developing policy, the real action began in November 2022 with the launch of the open banking framework. This framework provides a standardised structure for sharing of financial information among different entities, paving the way for greater innovation and competition in the financial sector. With this initiative, the Central Bank of Saudi Arabia is firmly positioning the country as a leader in the global fintech arena.

SAMA’s release of the Account Information Services (AIS) framework – which simply outlines guidance on the sharing of banking data – has provided crucial insight into the guidelines and use cases for open banking’s account information sharing services. This framework offers several scenarios where banking data can be used to develop innovative products and services, such as credit risk assessment, account aggregation, tax filing, and customer onboarding, among others. SAMA is poised to release the Payment Initiation Services (PIS) framework later this year, further cementing the country’s dedication to driving fintech innovation and growth.

The regulator is also taking a unique approach to open banking with a use-case-first approach. This approach is both distinctive and flexible, allowing fintechs to test open banking use cases and gauge their market viability within SAMA’s regulatory sandbox, before seeking licensing and market release. Moreover, SAMA’s sandbox is ‘always open’ and available for fintech applications at any time, without the limitations of a set cohort-based approach that requires adherence to fixed timelines.

Most recently, SAMA made another significant announcement, revealing the launch of its Open Banking Lab. This lab is intended to be the go-to tech environment for the speedy development and deployment of open banking services. It will oversee the progress of banks and fintechs to ensure compliance with the framework and market readiness. With this initiative, SAMA is providing a crucial platform for the development and delivery of cutting-edge fintech solutions.

Tarabut Gateway was on the first batch of fintechs and early market participants to be permitted by SAMA to test its innovative services under the Regulatory Sandbox environment.

Progress expanding to other countries in Mena

Similarly, exciting developments are underway in other countries such as Egypt, Oman, and Kuwait. The Central Banks of Egypt and Oman have taken significant steps by establishing regulatory sandboxes, enable fintech innovators to test their products and services in a safe and secure environment. Meanwhile, the Central Bank of Kuwait has issued regulatory guidelines to facilitate experimentation with new fintech solutions. These testing environments and sandboxes will pave the way for customised frameworks tailored to the unique needs of each country’s financial landscape.

Not to mention Bahrain, which has been at the forefront of the open banking movement with several live implementations already in place and an ambitious plan to expand to open finance. The country’s Central Bank has taken proactive steps to encourage innovation and competition in the financial sector. As a result, the country has seen a surge in the number of fintech startups in recent years, with many focusing on developing open banking solutions. Bahrain is expected to continue its journey towards open finance, with the integration of other financial services, such as insurance and investments.

As the region continues to advance in its implementation of open banking, it is clear the benefits of increased competition, innovation, and financial inclusion are within reach for both consumers and financial institutions.

• Almoayed is the founder and CEO of open banking platform Tarabut Gateway.